Investors Still Shy About Alternatives

Jun 14, 2012

By now, we’ve all heard that so-called alternatives have practically gone mainstream. Following the market crisis of 2008 and 2009, when traditional investing models failed, and considering the low-return environment predicted for the near- and possibly long-term, they’ve been touted as essential for diversification and yield. But investors are wary nonetheless, according to a recent survey from BlackRock.

Concerns about risk and a lack of information are holding investors back, the money manager’s research suggests. About six of 10 respondents said they are less willing to consider “nontraditional” asset classes due to market volatility. About half said alternatives are too “risky.” And 45 percent said they are more suitable for sophisticated investors.

Most investors think more education is needed (sixty-five percent) but at least some advisors are trying. Among respondents with assets of $2 million or more, 43 percent said they’d been introduced to alternative investments. Alas, a third said their advisor “has never shown me how alternatives can fit in my portfolio.”

What do you think? Are alternatives a tough sell? Are they difficult to explain to clients?